KOLKATA | NEW DELHI: Apple has sorely disappointed Indian fans by launching a 4-inch iPhone that so clearly doesn’t seem targeted at emerging markets. The new iPhone SE, starting at $399 (Rs 27,500) in the US for the 16GB version, will be available in India from April 8 at Rs 39,000 (about $600), Apple’s distributors said, continuing with its strategy of pricing launch models at a hefty premium in the country.

Grey market traders have naturally spotted an opportunity for arbitrage but they say the small iPhone with high specs hasn’t generated the usual interest. The cost in India of the 64GB variant, which is priced in the US at $499 (Rs 34,000), hasn’t been announced. Distributors Redington and Beetel said pre-bookings will begin at midnight on March 29.

Indian retailers had been expecting much more aggressive pricing, pegging the new iPhone at a starting level of around Rs 22,000, which could have made it a volume grosser for the company, four industry executives said. Some of the surprise over the SE’s pricing may stem from Chief Executive Tim Cook having recently said that India was one of Apple’s key growth areas in the next decade.

The company is also seeking to set up its own retail stores in India. Retailers aren’t expecting blowout sales for the SE, recalling the lukewarm reception for an earlier variant. “iPhone SE may go down the same way as the earlier iPhone 5c model, which was a big flop in several countries including India due to incorrect pricing strategy,” said the chief executive of a leading cellphone retail chain.

“An iPhone launch always brings in customers enquiring about pre-bookings, but this time it has been a dull show.” On the other hand, Apple might adopt a tack it has followed before — cutting prices sometime after the launch to prop up sales. Gartner Research Director Vishal Tripathi expects this to happen because 4.7-inch iPhones are available for just a little more.

“The latest iPhone 6s is available at a market price of Rs 43,000-44,000, which is larger than SE in screen size and has competitive features,” he said. The 4-inch, 16GB 5S is available for around Rs 18,000 online while the iPhone 6 is available for Rs 36,000. The trade feels Apple will have to either drop prices shortly after launch or offer aggressive buyback schemes if it wants the SE to catch on.

Apple had priced the iPhone 6s and 6s Plus at Rs 14,000-16,000 more in India when they were launched in October than in the US and elsewhere, leading to lacklustre initial demand. The company then announced buyback schemes and a series of price drops to encourage buyers.

That helped Apple contest Samsung for leadership of the premium segment slot — handsets priced over Rs 30,000 — and toppling it by some measures, as reported by ET on February 20. Apple currently has around 2% share of the Indian smartphone market. A grey market seller in Kolkata’s Air-conditioned Market said enquiries for bookings had been low compared with those for the 6s and 6s Plus in September-October.

The grey market price of the SE will start at Rs 32,000-34,000, he said. A trader at Mumbai’s Heera Panna also said that demand had been higher for the 6s and 6s Plus.

“The launch phase too is much shorter this time, but probably the lower price of iPhone 6s online has dampened demand, making iPhone SE appeal to only loyalists and a smaller section of consumers who prefer smaller screens,” he said. He’s referring to the gap between sales starting in the US (on March 31) and in India being the shortest ever. Samsung did the same with its flagship Galaxy S7 and S7 Edge earlier this month, shortening the time between announcement and introduction in the Indian market, a reflection of how critical the market is for phone makers.

Apple’s pricing may be aimed at ensuring a gap between used phones and new ones in developed markets, said Counterpoint Research Senior Analyst Tarun Pathak. “I think Apple wants to create breathing space between the refurbished category and their entry-level offering as they may phase out the iPhone 5S soon,” he said. “It may work in matured, prepaid markets like the US, Europe, where the Apple iPhone installed base is high and niche of 4-inch users runs into millions.”

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